Essays on Technology and Culture

Copycats Chasing Money

Yiren Lu, a CS grad student at Columbia, and startup intern, published an interesting piece on the cultural and age divide between the startup scene and established tech world. It's long, but worth reading. It describes some of the problems with the current crop of new companies dominating discussion in the tech world—but not all of them.

The first thing I found interesting about Yiren's piece is how little money factors in. Sure, there's the usual, appropriate, digs at over-inflated valuations for companies that haven't made any money, or have a revenue model. However, there's no discussion of the financial motivation behind people going into the startup world, either as employees or founders. Like high finance in the years leading up to the Great Recession, hedge funds in particular, technology startups are attracting smart, money hungry youth. If you can get $10,000,000 for your startup with a minimum of effort, why work for the man? Or, if you're not the entrepreneurial type, but you can sling code, why not take a six-figure salary and live in San Francisco?

Money isn't everyone's motivation, but it's one motivating the number of copycat startups out there. Ev Williams strategy for creating a successful company is to find a need, and make it easier for someone to get it. It's a recipe so simple, it can be copied with only minimal changes to make something that'll get a decent investment. Just take a compatible business model, and shoehorn in your niche audience: professional social networking, virtual rewards for watching cartoons, one-on-one hookups for My Little Pony fans. If you can get an L-curve in user growth, you don't even need to make money before someone offers to buy you out. Boom, you're rich overnight.

Okay, it's not as simple as I'm making it sound, nor is it guaranteed to succeed. Hedge funds might be a more secure place to strike it rich if you're a well-networked college grad with a CS degree, but they're not cool anymore. Cool factor is as important as money, sometimes even moreso. Even if I didn't get a six-figure salary and a ton of perks, saying that I worked at a startup was a point of personal pride for a while. When you combine the the two, it's going to be a dangerous cocktail.

All that money and cool chasing comes at a cost, and here is where Yiren and I agree. The money and talent being frittered away on goofy, copycat startups that prioritize growth over revenue, and exist to be bought out by someone bigger. It becomes a dangerous cycle: the more companies that fit that profile and succeed, the more money and young talent they get to trap in their web. The companies that are trying to do longer-term, less exciting, but more important work to improve the technology everyone relies on are left to fend for scraps. If you could get a six-figure signing bonus to work for Facebook, or just “market rate” at a company doing less glamorous, but more important work, what would you take?

And, what would you take if you were a college graduate in your early 20s, with a pile of student loans?